Capital gains tax 'needs to be reduced' in upcoming Budget, warns PwC Partner
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Capital gains tax "needs to be reduced" to avoid stifling activity, PwC has warned.
In a pre-budget analysis on Wednesday, PwC Private Partner Mairead Harbron stressed that Ireland had one of the highest rates of capital gains tax in Ireland, warning that this could suppress activity and transactions.
"Our definite view is that that needs to be reduced," said Ms Harbron. However, she noted that changes remain unlikely, adding: "When you look at the Commission of Taxation and their view on it, they see any rate reduction as being a pure cost to the Exchequer.
"The expectation is that the Government will leave the rate where it is at this Budget and be maintained at 33%."
Ms Harbron also touched on speculations surrounding Capital Acquisition Tax, particularly the Group A thresholds that apply to gifts and inheritance between parents and children. The current threshold stands at €335,000 and has been maintained despite continued increases in house prices.
"It has not kept pace with the rise in property values," Ms Harbron noted. "This means a lot more families are looking at a tax burden on inheriting the family home. I think there is significant political and public pressure to change that.
"I expect there will be a change, either to €400,000 or €500,000 in this year's Budget."
On the topic of SMEs, Ms Harbron said private businesses remained under "significant pressure" coming into Budget 2025.
"Businesses are looking for support in attracting and retaining key talent, which includes measures such as allowing shares to be issued by SMEs.
Businesses are also seeking improvements to the Keep Scheme, a tax-efficient share option scheme introduced in 2018 which Ms Harbron said "needs to be simplified and easier for SMEs to access."
On the housing front, Ms Harbron said private businesses want to be in a position to offer employees accommodation in a tax-efficient manner without expensive charges. They also want to be able to provide loans to employees, she added.
"At present, there is a preferential loan interest rate of 13.5%. This is way out of line with our international counterparts, with the UK at just 2%."
Ms Harbron also noted measures introduced in last year's Budget, including the Angel Investor scheme, warning that it "needs to be simplified and expanded" for it to achieve its desired uptake.
Speaking on the upcoming Budget, PwC Workforce Tax Partner Doone O'Doherty noted five areas to look out for, those being typical measures targetted at middle-income earners, which may see cuts to USC and an increase in the standard rate cut off to €44,000; tax credits, where increases to the main credits are expected; housing, with the rent tax credit is expected to rise from €700 to €1,000; cost of living measures, which are expected to include another energy credit, and measures to reduce personal tax burdens if the Government is re-elected.
"We have had corporate tax roadmaps for the last number of years. I would be very interested to see if the Government takes the opportunity to lay out a pre-electoral, personal tax roadmap for the electorate.